##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended March 31, 2011
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 Commission File Number: 0-20100
 BELDEN & BLAKE CORPORATION
  Ohio
    
    34-1686642(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)1001 Fannin Street, Suite 800
Houston, Texas
    
    77002(Address of principal executive offices)
    
    (Zip Code)
 (Registrants telephone number, including area code)
 (Former name, former address and former fiscal year, if changed since last report.)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o
 o þ




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##### 



PagePART I Financial InformationItem 1. Financial Statements (unaudited)Condensed Consolidated Balance Sheets 
as of March 31, 2011 and December 31, 2010
    
    
    1Condensed Consolidated Statements of Operations: Three months ended March 31, 2011 and 2010
    
    
    2Condensed Consolidated Statements of Cash Flows: Three months ended March 31, 2011 and 2010
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    10Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    16Item 4. Controls and Procedures
    
    
    17PART II Other InformationItem 1. Legal Proceedings
    
    
    18Item 1A. Risk Factors
    
    
    18Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    18Item 3. Defaults upon Senior Securities
    
    
    18Item 4. (Removed and Reserved)
    
    
    18Item 5. Other Information
    
    
    18Item 6. Exhibits
    
    
    19Signatures
    
    
    20Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements
 BELDEN & BLAKE CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
 March 31,
    
    
    December 31,2011
    
    
    2010ASSETSCurrent assetsCash and cash equivalents
    
    $
    33,173
    
    
    $
    35,941Accounts
receivable (less accumulated provision for doubtful accounts: 
March 31, 2011  $482; December 31, 2010  $452)
    
    
    9,168
    
    
    
    9,913Inventories
    
    
    835
    
    
    
    832Deferred income taxes
    
    
    5,303
    
    
    
    4,266Other current assets
    
    
    148
    
    
    
    209Fair value of derivatives
    
    
    497
    
    
    
    794Total current assets
    
    
    49,124
    
    
    
    51,955Property and equipment, at costOil and gas properties (successful efforts method)
    
    
    703,193
    
    
    
    701,790Gas gathering systems
    
    
    1,239
    
    
    
    1,239Land, buildings, machinery and equipment
    
    
    2,420
    
    
    
    2,421706,852
    
    
    
    705,450Less accumulated depreciation, depletion and amortization
    
    
    187,206
    
    
    
    179,947Property and equipment, net
    
    
    519,646
    
    
    
    525,503Fair value of derivatives
    
    
    74
    
    
    
    47Other assets
    
    
    1,445
    
    
    
    1,517$
    570,289
    
    
    $
    579,022LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    2,567
    
    
    $
    2,120Accounts payable  related party
    
    
    520
    
    
    
    1,523Accrued expenses
    
    
    15,234
    
    
    
    22,417Current portion of long-term liabilities
    
    
    143
    
    
    
    143Fair value of derivatives
    
    
    14,601
    
    
    
    12,141Total current liabilities
    
    
    33,065
    
    
    
    38,344Long-term liabilitiesBank and other long-term debt
    
    
    23,916
    
    
    
    23,919Senior secured notes
    
    
    140,806
    
    
    
    141,056Subordinated promissory note  related party
    
    
    33,656
    
    
    
    32,846Asset retirement obligations and other long-term liabilities
    
    
    24,921
    
    
    
    24,637Fair value of derivatives
    
    
    29,548
    
    
    
    30,201Deferred income taxes
    
    
    140,121
    
    
    
    140,137Total long-term liabilities
    
    
    392,968
    
    
    
    392,796Shareholders equityCommon stock: without par value; 3,000 shares authorized and 1,534 shares issued
    
    
    
    
    
    
    Paid in capital
    
    
    142,500
    
    
    
    142,500Retained earnings
    
    
    4,843
    
    
    
    10,168Accumulated other comprehensive loss
    
    
    (3,087
    )
    
    
    (4,786
    )Total shareholders equity
    
    
    144,256
    
    
    
    147,882$
    570,289
    
    
    $
    579,022
   1




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BELDEN & BLAKE CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands)
 Three months ended
    
    
    Three months endedMarch 31, 2011
    
    
    March 31, 2010RevenuesOil and gas sales
    
    $
    14,177
    
    
    $
    15,689Gas gathering and marketing
    
    
    1,419
    
    
    
    1,590Other
    
    
    87
    
    
    
    13815,683
    
    
    
    17,417ExpensesProduction expense
    
    
    5,594
    
    
    
    4,969Production taxes
    
    
    285
    
    
    
    335Gas gathering and marketing
    
    
    1,456
    
    
    
    1,414Exploration expense
    
    
    500
    
    
    
    141General and administrative expense
    
    
    1,618
    
    
    
    1,832Depreciation, depletion and amortization
    
    
    7,262
    
    
    
    7,849Accretion expense
    
    
    340
    
    
    
    319Gain on sale of property
    
    
    (2,424
    )
    
    
    Derivative fair value loss (gain)
    
    
    4,096
    
    
    
    (24,075
    )18,727
    
    
    
    (7,216
    )Operating (loss) income
    
    
    (3,044
    )
    
    
    24,633Other (income) expenseInterest expense
    
    
    4,369
    
    
    
    4,974Other income, net
    
    
    (11
    )
    
    
    (18
    )4,358
    
    
    
    4,956(Loss) income before income taxes
    
    
    (7,402
    )
    
    
    19,677(Benefit) provision for income taxes
    
    
    (2,077
    )
    
    
    577Net (loss) income
    
    $
    (5,325
    )
    
    $
    19,100
   2




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BELDEN & BLAKE CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 Three months ended
    
    
    Three months endedMarch 31, 2011
    
    
    March 31, 2010Cash flows from operating activities:Net (loss) income
    
    $
    (5,325
    )
    
    $
    19,100Adjustments to reconcile net income
to net cash provided by operating activities:Depreciation, depletion and amortization
    
    
    7,262
    
    
    
    7,849Accretion expense
    
    
    340
    
    
    
    319Gain on sale of property
    
    
    (2,424
    )Amortization of derivatives and other noncash hedging activities
    
    
    6,508
    
    
    
    (21,291
    )Exploration expense
    
    
    500
    
    
    
    141Deferred income taxes
    
    
    (2,077
    )
    
    
    577Other non-cash items
    
    
    703
    
    
    
    (8
    )Change in operating assets and liabilities, net of
effects of acquisition and disposition of businesses:Accounts receivable and other operating assets
    
    
    806
    
    
    
    321Inventories
    
    
    (3
    )
    
    
    (56
    )Accounts payable and accrued expenses
    
    
    (3,820
    )
    
    
    (4,622
    )Net cash provided by operating activities
    
    
    2,470
    
    
    
    2,330Cash flows from investing activities:Proceeds from property and equipment disposals
    
    
    2,424
    
    
    
    Exploration expense
    
    
    (500
    )
    
    
    (141
    )Additions to property and equipment
    
    
    (5,324
    )
    
    
    (669
    )Decrease in other assets
    
    
    (71
    )
    
    
    (71
    )Net cash used in investing activities
    
    
    (3,471
    )
    
    
    (881
    )Cash flows from financing activities:Repayment of long-term debt and other obligations
    
    
    (59
    )
    
    
    (3
    )Settlement of derivative liabilities recorded in purchase accounting
    
    
    (1,708
    )
    
    
    (3,827
    )Net cash used in financing activities
    
    
    (1,767
    )
    
    
    (3,830
    )Net decrease in cash and cash equivalents
    
    
    (2,768
    )
    
    
    (2,381
    )Cash and cash equivalents at beginning of period
    
    
    35,941
    
    
    
    46,740Cash and cash equivalents at end of period
    
    $
    33,173
    
    
    $
    44,359
   3




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BELDEN & BLAKE CORPORATION
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2011
 (1) Basis of Presentation
   (2) Derivatives and Hedging
     4




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Natural Gas Swaps
    
    
    Crude Oil SwapsNYMEX
    
    
    
    
    
    
    NYMEX
    
    
    Natural Gas Basis SwapsPrice per
    
    
    
    
    
    
    Price per
    
    
    
    
    
    
    BasisBbtu
    
    
    Mmbtu
    
    
    Mbbls
    
    
    Bbl
    
    
    Bbtu
    
    
    DifferentialQuarter EndingJune 30, 2011
    
    
    2,057
    
    
    $
    4.00
    
    
    
    50
    
    
    $
    46.33
    
    
    
    1,943
    
    
    $
    0.196September 30, 2011
    
    
    2,058
    
    
    
    4.01
    
    
    
    51
    
    
    
    46.47
    
    
    
    1,964
    
    
    
    0.196December 31, 2011
    
    
    2,058
    
    
    
    4.26
    
    
    
    51
    
    
    
    46.47
    
    
    
    1,964
    
    
    
    0.1966,173
    
    
    $
    4.09
    
    
    
    152
    
    
    $
    46.42
    
    
    
    5,871
    
    
    $
    0.196Year EndingDecember 31, 2012
    
    
    7,005
    
    
    $
    4.09
    
    
    
    184
    
    
    $
    47.83
    
    
    
    6,991
    
    
    $
    0.086December 31, 2013
    
    
    6,528
    
    
    
    4.04
    
    
    
    164
    
    
    
    45.33
   Asset Derivatives
    
    
    Liability DerivativesMarch 31, 2011
    
    
    December 31, 2010
    
    
    March 31, 2011
    
    
    December 31, 2010Oil and
natural gas commodity
contracts
    
    $
    571
    
    
    $
    841
    
    
    $
    (42,465
    )
    
    $
    (40,560
    )Interest rate swaps
    
    
    
    
    
    
    
    
    
    
    (1,684
    )
    
    
    (1,782
    )Total fair value
    
    $
    571
    
    
    $
    841
    
    
    $
    (44,149
    )
    
    $
    (42,342
    )Location of derivatives in our consolidated 
balance sheet:Derivative asset
    
    $
    497
    
    
    $
    794
    
    
    $
    
    
    
    $
    Long-term
derivative asset
    
    
    74
    
    
    
    47
    
    
    
    
    
    
    
    Derivative liability
    
    
    
    
    
    
    
    
    
    
    (14,601
    )
    
    
    (12,141
    )Long-term derivative liability
    
    
    
    
    
    
    
    
    
    
    (29,548
    )
    
    
    (30,201
    )$
    571
    
    
    $
    841
    
    
    $
    (44,149
    )
    
    $
    (42,342
    )
   5




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Three Months EndedMarch 31,2011
    
    
    2010The following amounts are recorded in oil and gas sales:Unrealized losses:Oil and natural gas commodity contracts
    
    $
    (2,721
    )
    
    $
    (3,309
    )The following are recorded in derivative fair value loss (gain):Unrealized losses (gains):Oil and natural gas commodity contracts
    
    $
    2,267
    
    
    $
    (28,779
    )Interest rate swaps
    
    
    (98
    )
    
    
    388Total
    
    
    2,169
    
    
    
    (28,391
    )Realized losses:Oil and natural gas commodity contracts
    
    
    1,701
    
    
    
    3,895Interest rate swaps
    
    
    226
    
    
    
    421Total
    
    
    1,927
    
    
    
    4,316Derivative fair value loss (gain)
    
    $
    4,096
    
    
    $
    (24,075
    )
 (3) Industry Segment Financial Information
  (4) Fair Value of Financial Instruments
   6




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(5) Supplemental Disclosure of Cash Flow Information
 Three months ended
    
    
    Three months ended(in thousands)
    
    March 31, 2011
    
    
    March 31, 2010Cash paid during the period for:Interest
    
    $
    6,678
    
    
    $
    8,494Non-cash investing and financing activities:Non-cash additions to property and equipment
    
    
    3,689
    
    
    
    185Non-cash additions to debt
    
    
    810
    
    
    
    
 (6) Contingencies
  (7) Comprehensive (Loss) Income
  Three months ended
    
    
    Three months endedMarch 31, 2011
    
    
    March 31, 2010Comprehensive (loss) income:Net (loss) income
    
    $
    (5,325
    )
    
    $
    19,100Other comprehensive income, net of tax:Reclassification adjustment for derivative loss
reclassified into earnings, net of tax
    
    
    1,698
    
    
    
    1,798Change in accumulated other comprehensive income
    
    
    1,698
    
    
    
    1,798$
    (3,627
    )
    
    $
    20,898
 (8) Related Party Transactions
    7




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(9) New Accounting Standards
  (10) Fair Value Measurements
 Recurring Basis
  Fair Value Measurements Using:Quoted Prices in
    
    
    SignificantActive Markets
    
    
    Other
    
    
    Significantfor Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    InputsTotal Carrying Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)At March 31, 2011Commodity contracts
    
    $
    (41,894
    )
    
    
    
    
    
    $
    (41,894
    )
    
    
    Interest rate swaps
    
    
    (1,684
    )
    
    
    
    
    
    
    (1,684
    )
    
    
    Total
derivative liabilities
    
    $
    (43,578
    )
    
    
    
    
    
    $
    (43,578
    )
    
    
    At December 31, 2010:Commodity contracts
    
    $
    (39,719
    )
    
    
    
    
    
    $
    (39,719
    )
    
    
    Interest rate swaps
    
    
    (1,782
    )
    
    
    
    
    
    
    (1,782
    )
    
    
    Total
derivative liabilities
    
    $
    (41,501
    )
    
    
    
    
    
    $
    (41,501
    )
    
    
    
   (11) Asset Retirement Obligations
   8




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Balance as of December 31, 2010
    
    $
    24,701Accretion expense
    
    
    340Liabilities incurred
    
    
    1Liabilities settled
    
    
    (58
    )Revisions in estimated cash flows
    
    
    Balance as of March 31, 2011
    
    $
    24,984
  (12) Long-Term Debt
    (13) Subsequent Events
     9




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Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Forward-Looking Information
  
    
    our future financial and operating performance and results;
    
    our business strategy;
    
    our estimated net proved reserves and standardized measure;
    
    market prices;
    
    our future derivative activities; and
    
    our plans and forecasts.
   
    
    fluctuations in prices of oil and natural gas;
    
    significant disruptions in the financial markets;
    
    future capital requirements and availability of financing;
    
    uncertainty inherent in estimating our reserves;
    
    risks associated with drilling and operating wells;
    
    discovery, acquisition, development and replacement of oil and natural gas reserves;
    
    cash flows and liquidity;
    
    timing and amount of future production of oil and natural gas;
    
    availability of drilling and production equipment;
    
    marketing of oil and natural gas;
    
    developments in oil and natural gas producing countries;
  10




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
    
    competition;
    
    general economic conditions;
    
    governmental regulations;
    
    receipt of amounts owed to us by purchasers of our production and
counterparties to our derivative financial instrument contracts;
    
    hedging decisions, including whether or not to enter into derivative financial instruments;
    
    events similar to those of September 11, 2001;
    
    actions of third party co-owners of interest in properties in which we also own an interest;
    
    fluctuations in interest rates and the value of the U.S. dollar in
international currency markets; and
    
    our ability to effectively integrate companies and properties that we acquire.
    11




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Results of Operations
  Three months ended March 31,2011
    
    
    2010ProductionGas (Mmcf)
    
    
    2,497
    
    
    
    2,603Oil (Mbbls)
    
    
    68
    
    
    
    67Total production (Mmcfe)
    
    
    2,903
    
    
    
    3,006Average price (1)Gas (per Mcf)
    
    $
    3.27
    
    
    $
    4.13Oil (per Bbl)
    
    
    89.01
    
    
    
    73.28Mcfe
    
    
    4.88
    
    
    
    5.22Average costs (per Mcfe)Production expense
    
    $
    1.93
    
    
    $
    1.65Production taxes
    
    
    0.10
    
    
    
    0.11Depletion
    
    
    2.49
    
    
    
    2.58
 
 (1)
    
    The average prices presented above include non-cash amounts related to derivative
contracts. Excluding these non-cash amounts from oil and gas sales revenues would result in
the following average prices: Three months ended March 31,2011
    
    
    2010Gas (per Mcf)
    
    $
    4.36
    
    
    $
    5.41Oil (per Bbl)
    
    
    89.01
    
    
    
    73.28Mcfe
    
    
    5.82
    
    
    
    6.32
 First Quarters of 2011 and 2010 Compared
 Revenues
     12




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Costs and Expenses
          13




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Liquidity and Capital Resources
 Cash Flows
      Capital Expenditures
  Financing and Credit Facilities
   14




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15




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Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
       16




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Natural Gas Swaps
    
    
    Crude Oil SwapsNYMEX
    
    
    
    
    
    
    NYMEX
    
    
    Natural Gas Basis SwapsPrice per
    
    
    
    
    
    
    Price per
    
    
    
    
    
    
    BasisBbtu
    
    
    Mmbtu
    
    
    Mbbls
    
    
    Bbl
    
    
    Bbtu
    
    
    DifferentialQuarter EndingJune 30, 2011
    
    
    2,057
    
    
    $
    4.00
    
    
    
    50
    
    
    $
    46.33
    
    
    
    1,943
    
    
    $
    0.196September 30, 2011
    
    
    2,058
    
    
    
    4.01
    
    
    
    51
    
    
    
    46.47
    
    
    
    1,964
    
    
    
    0.196December 31, 2011
    
    
    2,058
    
    
    
    4.26
    
    
    
    51
    
    
    
    46.47
    
    
    
    1,964
    
    
    
    0.1966,173
    
    
    $
    4.09
    
    
    
    152
    
    
    $
    46.42
    
    
    
    5,871
    
    
    $
    0.196Year EndingDecember 31, 2012
    
    
    7,005
    
    
    $
    4.09
    
    
    
    184
    
    
    $
    47.83
    
    
    
    6,991
    
    
    $
    0.086December 31, 2013
    
    
    6,528
    
    
    
    4.04
    
    
    
    164
    
    
    
    45.33
   
 Item 4.
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Change in Internal Controls Over Financial Reporting
   17




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PART II OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings.
  
 Item 1A.
    
    Risk Factors
  
 Item 2.
    
    Unregistered Sales of Equity Securities and use of Proceeds.
  
 Item 3.
    
    Defaults upon Senior Securities.
  
 Item 4.
    
    (Removed and Reserved)
 
 Item 5.
    
    Other Information.
   18




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Item 6.
    
    Exhibits.
   +31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.+31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.+32.1
    
    Section 1350 Certification of Chief Executive Officer+32.2
    
    Section 1350 Certification of Chief Financial Officer
 
 +
    
    Filed herewith  19




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BELDEN & BLAKE CORPORATIONDate:May 11, 2011
    By:
    /s/ Mark A. HouserMark A. Houser, Chief Executive Officer, Chairmanof the Board of Directors and DirectorDate:May 11, 2011
    By:
    /s/ James M. VanderhiderJames M. Vanderhider, President, ChiefFinancial Officer and Director (Principal
Financial Officer)  20